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Time’s up for licence fee

The BBC must face reality over its future funding

Tim Congdon

This article is taken from the November issue of The Critic. To get the full magazine why not subscribe? Right now we’re offering three issue for just £5.

Daring appointments in broadcasting regulation are overdue and necessary, as the structure of the media industry in Britain has long cried out for change. Press reports a month or so back claimed that Charles Moore would soon be appointed chairman of the British Broadcasting Corporation and Paul Dacre would be the new head of Ofcom. Moore has ruled himself out, but Boris Johnson may proceed with the Dacre nomination to Ofcom.

Almost everyone involved in the public debate on British broadcasting now accepts that the BBC licence fee is unsustainable. That unsustainability was obvious a generation ago. The BBC might now be better placed in international competition if it had been forced by the Thatcher government in the 1980s to dispense with licence fee funding.

As Moore explained in the second volume of his Thatcher biography, Peter Warry — deputy head of the Number 10 policy unit from 1984 to 1986 — had already seen the crucial arguments. He advised her that new technologies “would undermine the justification for the licence by the 1990s”.

But, if the licence fee goes, how will the BBC survive? The licence fee money still provides 70 per cent of its total revenues. One thought-provoking idea — originally put forward by the Labour politician Tessa Jowell in 2013 — is to convert the BBC into a mutual company owned by more or less the entire adult population.

Last year Professor Philip Booth of St Mary’s University, Twickenham, put more flesh on the bones of the proposal. In an Institute of Economic Affairs pamphlet, entitled New Vision: Liberating the BBC from the licence fee, he advocated the use of encryption technologies to allow people to pay for the BBC’s television programmes. They would become subscribers, just like subscribers to Sky or BT Sport, and this subscriber status by itself would make them the BBC’s owners. In Booth’s words, “The BBC should be financed by subscription and owned by its subscribers.”

The BBC and its profit-hungry competitors may be very different animals, but they must confront reality

A subscriber-based mutual would be in the private sector, but the privatisation would be cuddly and inoffensive. Ideally, a newly-established National Broadcasting Trust could have subscription members and revenues, and would look after much-revered cultural output of a special kind, just as the National Trust looks after much-revered stately homes.

This would be “the People’s BBC”, with no danger of profits being maximised by cost-cutting managers, in capitalist fashion, to boost the company’s stock market valuation. The Jowell-Booth proposition could be made consistent, its supporters might claim, with the defence of news impartiality and national culture which have long been part of the BBC’s self-image and uniqueness.

How plausible is a National Trust model of the BBC? A fundamental issue arises straightaway. Is the BBC in future to be for Britain alone or for the world? For many good reasons the BBC’s brand continues to resonate all over the world, which argues that it should aim to have global relevance, viewers and listeners. Booth suggests that in its new form the BBC “could determine different subscription models for different markets (including online and overseas)”.

But there is a problem here. The world’s population is more than 100 times that of the United Kingdom. If viewers in every continent are to have the opportunity to subscribe to the BBC’s services and thereby to become its owners, how much attention would be paid to the interests of Britain and its citizens?

Amazon, Netflix and YouTube didn’t exist when Thatcher wanted BBC privatisation

Would the notion of a British Broadcasting Corporation have any meaning if British owners accounted for only 10 or 20 per cent of the total? Booth might reply that a separate international business could be set up, offering programmes globally — as in the UK — on a subscription basis, but which do not entitle foreigners to ownership.

How would that work? The BBC’s senior executives would have to manage conflicts of interest. How should costs be split, and resources invested, between the presumably non-profit-making UK activities and the hopefully profit-making world business? Alphabet (i.e. Google), Netflix, YouTube and Amazon already confront these strategic tensions, and yet they expand and prosper.

But the BBC and its profit-hungry competitors are very different animals. The tensions are resolved in traditional capitalist enterprises according to a well-understood formula. If the revenues of an activity (a subsidiary, a programme, a management team) exceed its costs, if it is profitable, keep it in being and perhaps expand it; if costs exceed revenues, close it down. The trouble with mutuals is that profit-maximisation is not the management focus.

Without doubt many people working for the BBC have motives other than profit-maximisation, motives which they believe to be higher, purer and better than those of the marketplace. The BBC may be full of people like that who sneer at Alphabet and Netflix, at YouTube and Amazon, and above all at Sky and its founder Rupert Murdoch. They must confront reality. It is more than 30 years since Margaret Thatcher’s policy unit warned that the licence fee had to go. Dacre and the incoming chairman of the BBC may have to repeat that message in a far more challenging context.

A sobering thought is that none of Alphabet, Amazon, Netflix and YouTube existed when, as prime minister, Margaret Thatcher wanted a commercially-driven privatisation of the BBC.

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